Stern Agee is trying to force ezpw to pay a dividend.
here is thier reasoning for the downgrade today
"Sterne Agee cut its stock-investment rating on Ezcorp Inc. (EZPW, $26.12, -$1.09, -4.01%) to underperform from buy and lowered its price target, saying in order to restore confidence that the pawnshop chain is focused on the needs of shareholders, it believes the board needs to announce a meaningful buyback or share repurchase program. However, the firm notes the company has not suggested it is moving in this direction and a dividend or buyback would represent a change in the company's past views on this subject."
Who really knows what other expenses, beyond the 6 mil annual fee, are being reimbursed under the agreement with Madison Corp,Mr. Cohen's wholly owned conduit for his "services".
The Chairman of the Audit Committee, our independent rep on the Board, is William Love,CPA(Austin,TX). His tel no. is (512)346-0908. I'll check with the new CFO to determine if he's available for a discussion on the new agreement.
If not, perhaps the large institutional holders of the non-voting shares will step up and ask, if they have not already, when we may see some relief or sharing of the rewards.
Maybe I oversimplified the potential return (100%) to prove my point and I agree that so far EZPW seems like an effective and legitimate business operation, in fact, I'm a shareholder and don't plan to sell any time soon. I'm hoping to realize my theoretical 100% or whatever fraction of that a better governance structure would provide.
As far as the dividend/advisory fees, I'm not claiming that they are unreasonably large for the services covered but that there would be no reasonable way of knowing if they are. Neither management nor the directors have any reason to bite the hand that feeds them. For all we know, Cohen might be for all practical purposes paying himself a dividend and providing no services. Realistically, who would you expect to blow the whistle in an arrangement like the one I'm picturing here?
The method is by contacting directors, who are OUR representatives. Even though we don't elect them, they have a fiduciary responsibility to the owners (US!). Ultimately, they are the ones vulnerable to lawsuits, too.
But really: don't call the management advisory fee a dividend unless you think you can show that it is unreasonably large for the services covered. (Remember that investment banking fees run high) A dividend to only class B share violates the corporate charter and is a big deal.
I seriously doubt that giving us the vote would double the stock price. There's always history (EZCorp has, for instance, been the most conciliatory large pawn owner in regulatory matters). There's geography (or mostly, investor conception of geography). There's confidence in operating management. Price jump from getting the vote, but not 100%.
EZ Corp. could easily double in price if Phil Cohen were to convert all class A shares into voting shares such as the current class B shares. My main reason for saying this is because FCFS carries a P/E of roughly double EZPW's and the one main difference between the two is the poor governance structure of EZPW. Their financials are very similar.
Why a shareholder like Phil Cohen would forego an instant 100% return in exchange for an unfair 7.6% dividend is beyond me. I wonder if there is any investor activist method of getting this straightened out. Maybe someone could talk some sense into Cohen.
Phillip Ean Cohen is the chairman of Morgan Schiff & Co.
In 1974 Courtland L. Logue, Jr., opened his first pawn shop in Austin, Texas. He retired as an accountant to build his chain. Logue located these stores near large grocery stores in lower-middle income communities rather than in impoverished neighborhoods. Seeking to counter the stereotype of pawn shops as dingy or seedy, Logue tried to paint his stores in a different fashion. In 1989, Morgan Schiff & Co. first invested in the company, leaving Logue as CEO. By 1991, Morgan Schiff had become the majority owner, and had decided to take the company public. With the capital injection from Morgan Schiff and the IPO, EZCorp expanded store fronts. Logue struggled as an executive, and Morgan Schiff brought in Vincent Liambase to be CEO. Liambase had previously been the CEO of Blockbuster. Lambiase created three executive-level positions: chief financial officer, vice-president of operations, and vice-president of marketing and merchandising. At the time he also decentralized certain controls and decision-making responsibilities to the store level, making store managers reported to regional managers. EZCORP used computer technology to facilitate management, with a new point-of-sale computer system and management information systems that allowed regional and central managers to obtain real-time data from individual store systems. EZCORP continued to open new stores but also closed stores that did not meet certain performance standards. At the end 1995 the company closed an additional 18 stores. At the start of 1996 EZCORP operated 245 stores in 11 states: 147 in Texas; 24 in Colorado; 21 in Indiana; 15 in Alabama; nine in Mississippi; nine in Georgia; eight in Oklahoma; seven in Tennessee; three in Louisiana; one in Arkansas; and one in Florida. To provide another outlet for excess jewelry inventory, EZCORP opened two JewelryLand Outlet stores in Atlanta in September 1996. The 1,500-square-foot (140 m2) stores resembled typical mall jewelry stores but operated like the retail end of a pawnshop. At 60 to 70 percent of actual value, jewelry prices ranged from $10 to $5,000.EZCORP rebounded from its mid-1990s financial difficulties. In 1998, the company closed only one store, acquired three stores, and established 35 new stores, for a total of 286 stores in operation. EZCORP entered three new markets, California, with six stores in Sacramento, and Las Vegas and Raleigh-Durham, with three stores each. The company attempted to reach a wider audience through the Internet with EZPAWN.com. The web site offered over 400,000 items for sale, but was intended primarily to sell its pre-owned, one-of-a-kind jewelry. A "virtual-photo jewelry tray" contained similar styles of jewelry for display upon request at the web site. In August 2000 Joseph Rotunda, after five months as COO, became CEO at EZCORP, while Lambiase became vice-chairman of the board. Rotunda brought experience from Thorn Americas, where he oversaw impressive growth of the Rent-A-Center, Remco, and U-Can-Rent stores, which increased from a total of 700 to 1,400 stores. EZCorp overtook Friedman's Inc. as Morgan Schiff & Co.'s largest investment. The company continues to battle government regulation, and is investing abroad.
They are using excess cash for acquisitions...see recent announcements. They always beat estimates from 3 to 5 cents. Bet they beat 4th quarter by $.10 which will push the stock very quickly to $35.00.